News of last week’s reopening of Saudi Arabia as a market for US beef reminds producers of the importance of exports to the industry, especially now when the herd and beef production is growing.
Annual meat supply is a function of beginning stocks (cold storage), domestic production, imports and exports, said Nevil Speer, vice president of AgriClear Inc., in comments for Beef Magazine. And because meat is effectively a perishable product, all production that isn’t exported must be cleared on the domestic market, along with all imported supplies.
The challenge, on a weekly and monthly basis, is finding the market-clearing price to ensure that product keeps moving in a relatively timely manner and protecting against significant buildup of inventory.
USDA National Agricultural Statistics data show the red meat industries experienced a sharp consumption decline during the past decade. However, this trend reversed in 2015 and Speer said it is likely to experience further upside in 2016.
That largely stems from bigger production, Speer said. The USDA currently is forecasting annual beef, pork and poultry production to be up 1.25, 0.5 and 1.02 billion pounds, respectively, in 2016.
IMPORTANCE OF EXPORTS
With expanding production comes the requirement for growing access to international markets. Without access to these markets, unsold product would result in an even larger supply problem in the domestic market and prices would sink in an effort to find that market-clearing level.
Enter Saudi Arabia. Prior to being closed in 2012, this market was an important piece of the beef export total. US exports to Saudi Arabia were valued at $30 million. And, unlike many other export markets, it is a premium retail and food service market, focusing on high-eating-quality middle meats.
The Saudi Arabian market will work through a process verification program. The cattle must be traceable and not fed any blood, porcine or equine products. However, once verified as a supplier to this market, a producer could find a lucrative outlet.
Verified natural cattle could supply the Saudis with beef quickly, according to IMI Global, a beef tracing and process verification firm. Packers wishing to supply this market may seek out such cattle and pay a premium to get them.
US imports are relatively small for poultry (<1% of consumption) but are 5% of pork consumption and 11% of beef consumption, Speer said.
“Our forecasts show 2017 adding an additional 6.1 pounds per capita (201 pounds in 2017 vs 195 pounds in 2016),” he said. “So in three years (2015-2017), we see US meat and poultry supplies rising 17 pounds per capita from 184 pounds in 2014.
That undoes the prior seven years of overall net supply declines of about 17 pounds per capita, Speer said.
Can exports save the markets from impending supply pressure? …the weak global economy and petro-dollar-decline has stalled overseas demand.
CASH CATTLE MARKET GENERALLY QUIET
Cash cattle markets Monday were quiet after trading Thursday $1 to $2 per cwt higher, at $118 to $119 on a live basis and $188 to $190 dressed. Estimated showlists are smaller, giving feeders a little more price leverage this week.
The USDA’s choice cutout Monday was $0.17 per cwt higher at $199.17, while select was up $1.64 at $191.84. The choice/select spread narrowed to $7.33 from $8.80 with 64 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $146.48 per cwt, up $0.45. This compares with the Aug settlement Monday of $149.12, down $0.52.